Fort Smith sales tax revenue up in March report, but below estimates

Sales tax collections for the city of Fort Smith were down in city and county sales taxes for the first quarter of the year.

Each of the city's 1% sales taxes (1% for streets and 1% for water and sewer projects) collected $1.635 million in the March report, up 1.24% from the same period in 2013.

Sales tax collections in the March report were 2.96% below budget estimates. (Because the state of Arkansas has a two-month delay in reporting collections back to the cities, the city of Fort Smith — for budgeting purposes — has historically reflected the collections on a one-month delay. Which is to say, the tax collections remitted to cities in March are from taxes collected in January and transferred by merchants to the state in February.)

Collections so far in the 2014 reporting period of the two 1% taxes were $8.709 million, while the same period in 2013 saw collections of $8.821 million. The same period in 2012 saw $10.234 million and $9.561 million in 2011.

Total collections in the year 2013 of the two 1% taxes were $38.937 million. Collections in 2012 of the two 1% taxes totaled $39.21 million, slightly ahead of the $38.683 million during 2011. The 2011 collections were 3.9% above 2010 collections.

Fort Smith's share of the county 1% sales tax in the March report was $1.294 million, up 2.75% from last year's total during the same period of $1.259 million. The collection was up 2.27%, or $28,672, compared to the revenue estimate of $1.265 million for the month.

The countywide tax generated $15.353 million for Fort Smith during 2013, up 0.49% compared to 2012 and down 1.99% compared to budget forecasts. The countywide tax generated $15.279 million in 2012, just ahead of the $15.15 million in 2011, but lower than the peak collection of $16.61 million in 2008.

The countywide tax collection is critical because the revenue is a little more than 40% of the city’s general budget of roughly $42 million. A majority of the general fund budget supports fire, police and other critical city functions. The dip in collections compared to budget estimates has resulted in city officials seeking 4% budget cuts from all departments.

POSSIBLE BUDGET CUTS
Following last month's report that showed a decline in sales tax revenues, the question was posed to Deputy City Administrator Jeff Dingman about whether the city would implement budget cuts across all of the city's departments.

"With just two months here in the bank, I don't know that we're ready to start making those decisions at this point. Like I said, we did it in April and May time frame (last year)," he explained. "As far as a set benchmark where we say we need to change something, I don't know that we have a set threshold."

In her Thursday (May 1) report, Bushkuhl did not push for any major cuts since franchise fee collections were up, though she said two departments may need to cut budgets to stay in line with revenues.

"Although the sales taxes are still below budget, the additional franchise fee revenues cover the shortfall and there does not need to be an adjustment to the General Fund budget at this time," she said. "The fire and parks department programs that are supported by the ¼% sales tax may need to adjust their budgets by approximately $23,000 if the sales tax trend continues. This reduction is less than 1% of each program’s budget for the year."